Home Daily Commentaries NZD underperforms as risk appetite falters

NZD underperforms as risk appetite falters

Friday 20 January, 2023

Daily Currency Update

The NZD faltered through trade on Thursday, among the day’s worst performers amid definitive risk-off shift. A surprise downturn in Australian labour market performance prompted a correction in Australian rate expectations. With US rates already trending lower, NZ rates dipped in sympathy dragging the NZD off early highs near US$0.6450 toward session lows near US$0.64. The downturn continued overnight as risk sentiment soured, amid growing concerns a US recession will strangle any hopes of a broader global economic rebound in 2023. Having touched intraday lows at US$0.6370 the NZD found support leading into the daily close and buys US$0.6398 at the time of writing. With little fallout from Prime Minister Arden’s resignation our attentions turn now to commentary from key Fed policy makers, while Japanese CPI data is expected to show inflationary pressures stretched to multi-decade highs.

Key Movers

The Japanese yen outpaced major counterparts on Thursday, buoyed by a backdrop of falling global rates and elevated risk aversion. With the yen pushing the USD below 128, and the euro and GBP enjoying a small uplift, the Dollar index fell on the day, down 0.33%. The euro continues to track between 1.0750 and 1.09, while sterling looks set to test a break above 1.24 having touched session highs at 1.2390. Growing concerns the US is on the brink of economic recession has absorbed market attentions, weighing on risk demand and dampening US rate expectations. A further decline in US housing starts and building permits, coupled with an uptick in Jobless claims, have added to softer data sets already printed this week and elevated calls for the Fed to slow the pace of rate hikes in a bid to cushion the economic impact. Our attentions turn now to commentary from key Fed policy makers, while Japanese CPI will provide a key marker for future Bank of Japan policy action. December CPI is expected to lift to 4%, a fresh multi-decade high and will only serve as a reminder to markets of the absurdity of the BOJ yield curve controls and ultra-easy policy stance.

Expected Ranges

  • NZD/USD: 0.6350 - 0.6450 ▼
  • NZD/EUR: 0.5850 - 0.6000 ▼
  • GBP/NZD: 1.9120 - 1.9480 ▲
  • NZD/AUD: 0.9180 - 0.9320 ▼
  • NZD/CAD: 0.8550 - 0.8780 ▼